DHL Chief warns of rise in air freight cost

The Chief Executive of DHL, Frank Appel has said that the cost of air freight could increase over the year as the reduction in international passenger flights leads to a “massive shortage” in cargo capacity.

DHL Boeing 777F. Photo by Jack Prebble | AeroNewsX

Back in March of 2020, which was considered to be the peak of the COVID-19 pandemic in Europe, the one common airline trend was to cut long haul services. In the era of quarantine periods, border closures to international visitors and other travel restrictions, there was barely a demand for long haul international services other than repatriation flights. As a result, international passenger demand collapsed and many international airlines cut their operational frequencies dramatically.

To highlight the current problem, in April 2019 about 500 round trip flights per day would operate between Europe and the United States. However, in April 2020 only about 80 flights were operating between the two continents each day. This represents approximately an 80-90 per cent reduction. In addition to passengers and their bags, it is estimated that 45 per cent of the world's cargo is transported on passenger flights.

The proportion of freight carried on western bound flights, from Europe to the US varies between routes but around 60% of all cargo is carried on passenger aircraft. With 80-90% of passenger planes not flying, this could mean that within a matter of weeks there has been roughly a 50% reduction in cargo capacity in the European-US cargo market. The situation is less severe in other markets, but overall, the air cargo capacity globally reduced by about 23% in March 2020.

With many shops and businesses forced to close in numerous European countries, this has resulted in a boom in business for e-commerce and online shopping during the lockdown. According to the head of DHL, this has created “a demand problem”. One of the world’s biggest logistic firms now believes that because of the “significant contraction of cargo capacity in passenger planes” this will increase the cost of air freight.

Deutsche Post DHL Chief Executive, Frank Appel outlined that the reduction in cargo capacity due to the limited operations of international passenger flights will be an advantage for “operators like us, who have relatively good access to cargo planes.” The logistics firm operates a fleet of more than 250 cargo aircraft in their Express division, which Appel said are in high demand. This is mainly due to the fact that there are more than 12,500 aircraft still in storage, according to research firm Cirium.

Even with prices set to increase for air freight, Deutsche Post DHL has only had to furlough a small percentage of employees during the COVID-19 pandemic. Appel said they have been able to redeploy excess staff to busier divisions within the company. Since March many international airlines have commenced chartered cargo services to pick up critical medical supplies in China.

Additionally, some passenger seats have been removed by certain airlines to increase cargo capacity, while several older passenger aircraft are being converted into freighters. With international airlines trying to adapt themselves to handle more cargo, Appel remains confident in the company's business model and insists it is “extremely robust.”